Indholdsfortegnelse for 9/10/2021 i Finweek - English

loud opposition was voiced during the past couple of weeks following the government’s publication of a green paper (basically a pre-policy document to test the waters) calling for mandatory social security deductions from all taxpayers. The 89-page document, released on 18 August, calls for the creation of a National Social Security Fund with employer and employee contributions ranging between 8% and 12% of earnings up to an earnings ceiling of R276 000 per year. The public would’ve had until 10 December to voice their views on this. However, the outcry against the proposal was so loud that the minister of social development, Lindiwe Zulu, pulled it by the end of the month. But is a universal social security “tax” or contribution new? In Namibia, for example, employees and employers contribute…

– Woolworths Group CEO Roy Bagattini put to bed a widespread proposition by fund managers and analysts for the retailer to separately list its food division. A July research report by analysts Rod Salmon and Chris Gilmour at Salmour Research recommended demerging and forming a separate listed entity that would result in a higher operating margin and unique position protected by higher barriers to entry. Bagattini told Business Times the group will continue consistently growing the food business ahead of the market as it has done in past years.…

shoprite is Africa’s largest grocery retailer, operating 2 840 outlets in 15 countries across Africa and the Indian Ocean Islands. Its brands include Checkers, Checkers Hyper, Usave, Hungry Lion, OK Furniture, OK Power Express, OK Furniture Dreams and House & Home. It has secondary listings on both the Namibian and Zambian stock exchanges. Share price history After correcting for three years between 2013 and 2016, Shoprite’s share price extended its long-term bull trend to an all-time high at 28 190c/share in March 2018 – this was despite the resignation of former CEO Whitey Basson in December 2017. However, after announcing its first drop in earnings in 2018 since 1998, which was the year when Shoprite acquired OK Bazaars for R1 from SA Breweries, the share price embarked on a prolonged…

while the Covid-19 pandemic has spread aggressively and quickly over the whole world, society has also seen the evolution and spread of other “viral” phenomena, including the dissemination of fake news, information conspiracy theories and general mass suspicions about what is truly happening. We all know that the world is no longer the same as it was a few years ago. Things have changed and will possibly keep on changing. The spreading of fake and/or misleading information is nothing new. It’s been going on for aeons. The information ecosystem of today has, however, drastically changed the way fake news and misleading information are disseminated and interpreted. Social media platforms and digital technologies have facilitated the sharing of news and information quite considerably. Within these online environments, fake news and information…

the purchasing managers’ index (PMI) is a valuable leading economic indicator used to identify market conditions based on monthly surveys completed by senior production managers. The value of PMI is that the data comes directly from key managers who understand the dynamics of a firm’s activities. To put it simply, the information comes straight from the horse’s mouth. Variables measured by the surveys include, but are not limited to, firms’ output, new orders, price changes, employment, future output, delivery times, and future activity. The focus here is on the whole economy PMI to better understand overall global growth trends, but the analysis can be broken down into specific areas of construction, services, and manufacturing. PMI data is straightforward to interpret as it is measured on a scale of zero to…

the number of companies listed on the JSE has decreased from 776 to 331 over the past 30 years, with over 14 companies delisting every year on a net average basis. This has spurred analysts to discuss the JSE’s “slow death” in the context of a struggling local economy, many arguing that investors should take their money and run. Is it this simple and should investors be worried? “There is cause for concern when a net delistings trend emerges over time. This could be symptomatic of a faltering economy and persistent negative business sentiment, but there are several other factors at play,” says Nadia van der Merwe, senior manager at Allan Gray. Looking at history to understand trends Considering the total number of listings on the JSE, much of the…

as an investor, one could almost be forgiven for being either petrified or excited given an abundance of investment possibilities. Choice and variety are meant to be good, right? A catch, though, is that choices can no longer be constructed simply on old-fashioned analyses based on valuation and economic data, amongst others. On the contrary, challenges in the current environment comprise ongoing government intervention; changing regulation; transformation of technological innovation; mutating pandemics and alike. Herewith, several important pointers aimed at an advantageous approach to portfolio construction and management in the present testing environment: More than simply focusing on investment returns Historically, asset management may have been primarily about returns, especially excess returns. However, today’s leading asset management operating models tend to be skewed towards a sound wealth management methodology. A…

The short version This issue’s isiZulu word is igama. Igama is a name. I suspect most people who read the Everyday Zulu column have no idea that I work in advertising. And having worked in advertising for over two decades, I am amazed by how much things have changed, and most of that change can be attributed to one igama. That igama is Mark Zuckerberg. When I first got into the industry, an advertising campaign was a TV ad, some radio, some print, outdoor and a bit of tactical stuff. Digital was an afterthought, and that’s if it was even part of the mix. But now … Oh, my goodness. So many elements. Social media really has changed everything. Every time we work on a campaign that requires social media…

the days of a man in an oversized, dreary grey suit, sitting at his desk in a smoke-filled office selling stock-standard insurance policies are long gone. Insurance is now the sexiest industry on the block. Just ask those who head up the Naspers* Foundry, which in early August announced another investment in the insurtech space: R120m into Naked, an AI-driven insurance firm. This follows a R34m investment into Ctrl, a digital short-term insurance advice platform, in July. The excitement makes sense. Insurance is generally a fast-growing sector as people in developing countries accumulate assets like houses and cars. The shift to digital, buttressed by lockdown measures, and new technologies like machine learning have accelerated both the demand for and supply of new kinds of insurance services. But there are also…

– US President Joe Biden said the events in Afghanistan are proof that no amount of military force would have delivered a stable, united and secure country. The White House appeared to be caught off-guard by the Taliban’s rapid advance and capture of the Afghan capital, Kabul. Responding to criticism that the US should have started evacuations sooner, Biden said in a televised press conference some Afghans hadn’t wanted to leave earlier in hope that it would not be necessary and that the Afghan government discouraged a mass exodus.…

former Gold Fields CEO Nick Holland won plaudits prior to his retirement announcement in August 2020 for having invested in new gold production, especially at a time when the gold price was relatively low. Establishing a base of about 2m ounces in gold annually for 10 years was ahead of the gold industry curve, especially as the sector has been reticent to invest in new gold resources, analysts said. To some extent, this assessment was reflected in Gold Fields’ share price, which gained 43% compared to a slim 3.5% gain for rival AngloGold Ashanti over the course of 2020. Today, however, that’s not enough. Chris Griffith, Gold Fields CEO, is keen to arrest the decline in the firm’s production from a peak of 2.7m ounces in 2024. He hopes to…

BUY SELL HOLD Merafe Resources has had a wild listing, peaking at over 400c in 2008. Ensuing load-shedding and collapsing demand subsequently sent the stock lower to under 100c where it has struggled along for the last couple of years with the occasional move towards 200c. The only asset is a minority holding, via Merafe Ferrochrome and Mining, with Glencore in what is the world’s largest ferrochrome miner. Recent results were very strong but what really caught my attention was a 66% increase in production as prices soar. But what stood out even more was inventories at R1.4bn and cash of almost R800m. This totals R2.2bn with the current market cap, at a 97c share price, standing at R2.4bn. The market has never really liked the minority stake as it…

on a recent JSE online event I attended, several investment experts were giving stock picks when the topic of net asset value (NAV) came up in relation to how all the stocks being picked were trading above their NAV. As I often refer to NAV in my columns, I thought it would be worth going into detail. Firstly, what is NAV? It is a metric derived from the balance sheet and essentially entails subtracting all liabilities from all assets. This is also the equity value we use in ratios such as return on equity (RoE). Hence, it is the breakup value of the company. NAV is also a function of a holding company whereby it is the value of all their assets less any liabilities, often the tax on profits…

this past quarter in South Africa has verged on a nightmare for some and we’re not out of the woods yet. Government has temporarily managed to stabilise the political situation but we’ve yet to face some of the economic and fiscal fall-outs. In this edition, prominent financial commentator Dawie Roodt suggests that we may well be heading towards a “failed state”, requiring urgent attention. National Treasury projects that government debt will increase to R4.38tr, or more than 80% of GDP, in the next two years due to (uncontrolled) government expenditure and slow economic growth. Five years ago, debt was a mere 53% of economic output. The prime danger of this kind, ultimately, as has long been experienced in Latin America and elsewhere, is the printing of money, hyperinflation, currency controls,…

local investors might think the grass is greener on the other side due to the myriad of challenges our country faces. In recent months, however, we have seen some of the country’s largest and most reputable investment managers warm up to domestic assets, often citing that poor sentiment has created an opportunity too attractive to ignore. So, how do you decide how much of your funds to invest offshore and how much to invest locally? Making decisions based solely on the past can prove quite costly. Our research shows that, over the next ten years, the US stock market will likely underperform the past ten years by a long margin. Similarly, the prospects for SA investments seem much better than what was experienced over the recent past. This argument is…

sadly, South Africa has digressed down a slippery slope in recent years, coerced by various political, economic, social and international factors. The question arises: Whereto from here? We spoke to Dawie Roodt, a founding member, the chief economist and director of the Efficient Group, a diversified financial services company. Do the new Cabinet and executive have the skills, insight and political will to overcome SA’s multiple crises? The answer is a big no. It’s important to understand that the ANC has created a massive patronage system, meaning that its existence is primarily focused on feeding off the state. Secondly, ideologically the ANC is socialist, driven by roots anchored somewhere in 1920s Leninism. It’s simply not ideologically placed to run a modern economy. Additionally, die-hard communists in its ranks, such as…

Not all primary food producers benefitted in equal measure from higher prices. Using Stats SA’s indices (to compile consumer food price inflation), price increases over the past 4.5 years are varied (see graph). Meat producers saw a cumulative rise in prices of 34% between December 2016 and July 2021. Producers of oils and fats (which includes sunflowers, soybeans and canola) attained price increases of 31.8% over the period whereas those producing fish gained 26.6%. On the other end of the spectrum, fruit prices gained 0.4% over the period, explaining why some large food producers may want out. Other factors, however, also influenced those operating in the fruit industry. Rella Suskin, head of research at Benguela Global Fund Managers, compared Tiger Brands’ to-be-sold deciduous fruit business with RFG’s international division as…

“humans need not apply.” Imagine reading those words on a job-seeker website portal. The smart technology era introduced us to computer systems that can be programmed to do the tasks that most human workers do daily. Computers can see (computer vision), they can speak and hear (natural language processing), they can execute tasks (robotic process automation) and they can think and learn (machine learning). One might wonder what is left for human workers to do in an age where robots can do what we do faster, more accurately, without being involved with unions and industrial action, and never needing sleep or sick leave. In his book Humans Need Not Apply: A Guide to Wealth & Work in the Age of Artificial Intelligence, futurist and technology entrepreneur Jerry Kaplan cautions readers…

–The Financial Sector Conduct Authority (FSCA) commissioner, Unathi Kamlana, justified the FSCA’s suspension of ZAR X’s exchange licence as a necessary step to protect the broader investing public. ZAR X is SA’s first alternative exchange, operating since February 2017. The FSCA cited noncompliance with the Financial Markets Act and regulations relating to an exchange’s liquidity and capital adequacy requirements as grounds for the suspension. The exchange licence will be cancelled if the non-compliance is not rectified within three months. ZAR X lodged an appeal against the decision.…

while public markets were decimated by the knockon effects of the Covid-19 pandemic in 2020, the same cannot be said for private markets, particularly the venture capital and private equity asset subclasses. Private market asset classes continued to perform well globally, outpacing most measures of comparable public market performance. The strength and speed of the rebound suggest resilience and continued momentum as investors looked to private markets for higher potential returns in a sustained low-yield environment. In 2019, the South African Venture Capital and Private Equity Association (SAVCA) said 69 early-stage fund managers had invested R1.23bn into new and start-up stage SA businesses. In 2020, one would have assumed this figure to have declined as deals dried up due to pressures brought on by the pandemic. Instead, another record year…

BUY SELL HOLD Sibanye-Stillwater is the world’s largest primary producer of platinum, the second-largest primary producer of palladium and a top-tier gold producer, ranking third globally on a gold-equivalent basis, as well as a significant producer of rhodium and other platinum group metals (PGMs) and associated minerals such as chrome. The group recently declared an R8.54bn interim dividend for the six months to end-June after another record financial performance. Thanks to improved operational performance paired with exceptionally strong precious metals prices, the group profit was doubled to R24.32bn compared with R9.73bn in the same period a year earlier – also surpassing the previous high of R20.89bn in the second half of 2020. Headline earnings per share surged 141% year-on-year to 835c. All this has allowed Sibanye to declare an interim…

relativity in the investment world is as important as it is in the real world. Let’s use the Covid-19 pandemic as an example: South Africa and Italy both have a population of around 60m people. We know that Italy was one of the hardest hit countries in the world at the onset of the pandemic, and up to the end of 2020 they lost an average of 185 people per day to Covid-19. South Africa was hit just as hard but lost relatively fewer people to Covid-19 with an average of 100 deaths per day up to the end of 2020. Italy was more successful with their vaccination programme this year, however, and up to and including 16 August 2021 (according to the WHO), 31.4m people have been fully vaccinated.…

MASSMART Offloading and buying Massmart announced it’s in negotiations to buy a controlling stake in OneCart, thereby giving indications as to its longer-term strategy. Parent company Walmart competes toe-to-toe with Amazon in the US, and they have a majority stake in Indian Flipkart which Walmart acquired control of in 2018. Clearly Massmart is focusing on online retail locally and Walmart will be able to provide strong tech and insights which, coupled with OneCart, could see the company become a meaningful player in the still fledgling online retail space in South Africa. Staying with Massmart, the company has thrown in the towel on some lower-margin businesses as it is selling Cambridge Food, Rhino and Massfresh to Shoprite*. The deal is worth R1.4bn, which Massmart will use to pay down debt and…

through my career of more than two decades in investments, I have learned several lessons. Here are a few. 1. Have a clear investment philosophy and process You can’t invest successfully over time unless you have a well-defined philosophy and process. The key is finding a process that works and sticking to it day in and day out. So, being disciplined is crucial. 2. Align your temperament, intellect and experience Being a successful investor is not only about harnessing your intellect and experience. Temperament is incredibly important in fund management because, ultimately, it determines how you behave in difficult circumstances. When you think about any investment decision, the first question you must ask yourself is: “What edge do I have?” Secondly, you need to consider whether you have superior insight…

The UN’s Food and Agriculture Organization (FAO) publishes its Food Outlook twice a year. The latest, with data until the end of May and published in June this year, shows up interesting facts about food consumption in the world. In the accompanying table, we show the FAO’s calculations for the consumption of different food types per person per year in kilograms. We compared consumption in 2010/2011 with that in 2021/2022. The table shows a marked shift away from grain products (especially rice) and sugar to meat and fish products over the past decade.…

Brand Pretorius (73) retired in 2011 as the CEO of McCarthy Motor Holdings and as executive director of the Bidvest Group. Pretorius has, however, kept on working during his “retirement”. Consequently, his career now stretches over a period of 48 years: 22 years at Toyota SA, 16 years at McCarthy and 10 years in his own consultancy. He is currently a director of Italtile. Pretorius’ investment portfolio is diversified in respect of sectors and geography; it is managed by a qualified independent expert. “My approach is conservative. Up until now, I have been able to limit my monthly drawdowns from my living annuities to 2.5% because I have supplemented my income with my director’s fees, leadership coaching and consultancy work. I have been able to invest in more retirement annuities…

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